N Brown Group has revealed a series of measures it has undertaken to help mitigate the “significant and sudden reduction” in demand it has experienced amid the coronavirus outbreak.
In a trading update this morning (23 March), the group said that trading for the first two weeks of the financial year were in line with expectations, however during the last week it has seen daily product sales down in excess of 40% compared to expectations.
As a result, the company added it has taken a number of “immediate and proactive measures” to reduce costs and preserve liquidity, including:
- A significant reduction in marketing expenditure with immediate effect and for the foreseeable future if market conditions do not improve
- Stopping and deferring all non-essential capital expenditure
- Working collaboratively with HMRC to secure the deferral of all tax and national insurance payments
- Stopping stock purchases immediately, thereby aligning stock levels for SS20 with reduced customer demand. Going forward, it will be re-evaluating its stock intake plans
- Freezing all recruitment and reviewing organisational structures.
It also revealed it has financing facilities in place totalling £652.5m and will also be suspending dividend payments for the “foreseeable future”.
The group said: “The Bank of England in its ‘statement on IFRS 9 and Covid-19’ on 20 March recognised that there is currently a very high level of uncertainty around how Covid-19 will impact the economy. It is, therefore, extremely difficult to quantify the expected impact as reliable and detailed forecasts cannot yet be made.
“The group is currently reviewing the potential impact of Covid-19 on its FY20 IFRS9 bad debt provision in light of significantly worse future macro-economic scenarios which impact the provision model.”
It added: “Whilst the board cannot be certain of the impact of Covid-19 on the Groups FY20 IFRS 9 Bad debt provision, the board expects the group’s adjusted profit before tax to be lower than the previously guided range of £70m to £72m.